Open innovation

Open innovation is the purposeful movement of knowledge across organisational boundaries to accelerate innovation and create additional routes to market. It combines external ideas with internal capability and allows selected internal ideas to be commercialised elsewhere. “Open” does not mean giving away everything or abandoning intellectual-property governance.

When to use it

• To develop products, services or technologies more quickly or effectively.

• To access knowledge outside the firm.

• To find responsible uses and markets for ideas the firm cannot exploit itself.

Origins

The practice predates the label. Britain’s Longitude Act of 1714 created a public reward for a practical way to determine longitude at sea, ultimately recognising John Harrison’s marine timekeepers. Industrial research laboratories have also interacted with universities, suppliers and inventors for about 100 years.

During the 1980s and 1990s, expanding scientific knowledge, global networks and digital communication increased experimentation with alliances, licensing, venture investment and public challenges. Henry Chesbrough coined and organised the modern concept in Open Innovation, published in 2003.

What it is

Open innovation uses deliberate inflows and outflows of knowledge. Inflows include licensing, partnerships, acquisitions, supplier collaboration, university research, customer co-creation and expert networks. Outflows include licensing, spin-outs, standards, open-source release and partnerships that take dormant technology to market.

The business model matters. External knowledge creates no value if the organisation cannot absorb, integrate and commercialise it. Likewise, sharing an idea creates no benefit unless governance explains what is shared, with whom, under what rights and how contributors are treated.

Open and closed practices coexist. Safety-critical, regulated or differentiating knowledge may require strict protection, while interfaces or complementary tools may benefit from openness.

How to use it

• Frame the challenge: Define a specific problem, evaluation criteria, constraints and owner. Open-ended suggestion boxes produce noise and participant cynicism.

• Choose the mechanism: Customer immersion, licensing, research partnership, challenge prize, innovation network, corporate venture, crowdfunding or product platform solve different problems. Crowdfunding primarily opens finance and market validation; it does not automatically open technology.

• Set rights before disclosure: Agree confidentiality, background and foreground IP, data rights, publication, licensing, attribution, payment, liability and exit. Obtain specialist legal advice where needed.

• Build absorption capacity: Assign technical and commercial teams to evaluate, test and integrate external contributions. Budget for due diligence and implementation, not only idea collection.

• Protect contributors and the public: Avoid unpaid speculative work disguised as participation, respect research ethics and do not expose confidential customer or employee information.

• Close the loop: Tell participants what happened, evaluate portfolio outcomes and stop mechanisms that do not create value.

Top practical tip

Match a sharply framed innovation problem with the right external community and a pre-agreed route for rights, evaluation and adoption. Openness needs operating capacity.

Top pitfall

Do not solicit ideas without resources to review, respond and implement. Nor should reciprocity be confused with indiscriminate disclosure of confidential or regulated information.

Further reading

• Chesbrough, H.W. (two thousand and three). Open Innovation. Harvard Business School Press.
• Chesbrough, H.W., Vanhaverbeke, W. and West, J. (eds.) (two thousand and six). Open Innovation: Researching a New Paradigm. Oxford University Press.